Hutchison Whampoa

Hutchison spin-off still on after Essar snub

PUBLISHED : Thursday, 03 August, 2006, 12:00am
UPDATED : Thursday, 03 August, 2006, 12:00am

Hutchison Telecommunications International Ltd (HTIL), part of Li Ka-shing's Hutchison Whampoa, said the decision by Indian partner Essar Group to abort a HK$2.7 billion sale of its Mumbai mobile business to their joint venture would not derail plans to spin off the shared unit.

Even so, HTIL said Essar's decision to scuttle the deal to inject BPL Mumbai into Hutchison Essar, owned 67 per cent by HTIL and 33 per cent by Essar, was 'regrettable and groundless'.

HTIL said it would 'take appropriate actions vigorously' to close the transaction but stopped short of saying it would resort to the courts for settlement.

HTIL yesterday acknowledged Indian press reports that Essar had served it a termination notice on Tuesday calling off the disposal of its BPL Mumbai, which has 1.3 million customers, after Essar failed to complete the deal by the Monday deadline.

Essar dropped the deal as it could not get approval from the country's Department of Telecommunications, Indian press reports said. HTIL said in a stock exchange announcement last night that all conditions required for completion had been fulfilled or waived.

Essar Teleholdings chief executive Vikas Saraf did not return a call for comment.

'We are very confident that HTIL and Essar are aligned in their views towards the long-term development for Hutchison Essar,' an HTIL spokeswoman said last night.

HTIL management has said the group hoped to spin off 10 per cent of Hutchison Essar, valued by some analysts at US$10.6 billion, on the Mumbai stock exchange by the end of this year.

Hutchison Essar has 2.1 million customers in Mumbai. Buying BPL Mumbai was part of a US$1.15 billion deal announced in September last year in which Hutchison Essar would also buy another unit, BPL Cellular, which operates in three licensed regions of Maharashtra, Tamil Nadu and Kerala, from Essar. That sale was completed in January.

A source close to HTIL said Essar and two other BPL Mumbai shareholders did not honour the sale agreement 'as they probably want to fetch a higher price than the agreed HK$2.7 billion', the source said. Local press reported that there was a lot of interest in BPL Mumbai.

HTIL, which operates in 16 of India's 23 licensed regions, had 16.06 million customers for its 2G GSM network as of April. It hopes to expand to all 23 regions through buying the seven remaining licences being applied for by Spacetel, also a subsidiary of Essar, for US$6 million cash.

'The Spacetel acquisition is on-going and not affected,' an HTIL spokeswoman said.

HTIL chief financial officer Tim Pennington has said such acquisitions would be done independently of Hutchison Essar's initial public offering. However, any decision to list the firm would require agreement from both HTIL and Essar.

Shares of HTIL, which fell as much as 4.98 per cent yesterday, recovered to close down 24 HK cents or 1.81 per cent at HK$13.